Say ‘Ello’ to the New Ad-Free Social Network

The new social networking site Ello has generated an enormous amount of interest due to its promise to be ad free and not to sell user information to advertisers. Interest in the company has exploded — at one point it was the fifth hottest trend on Google — indicating there is a tremendous appetite for an alternative to social media giants like Facebook and Twitter, which endlessly monitor their users’ activity and sell that data to advertisers.

“Your social network is owned by advertisers,” reads Ello’s manifesto, posted on its website. “Every post you share, every friend you make, and every link you follow is tracked, recorded, and converted into data. Advertisers buy your data so they can show you more ads. You are the product that’s bought and sold.”

Ello launched in early August as an invitation-only service and almost immediately received media attention after a group of drag queens, outraged after Facebook disabled their accounts because they were not using their real names, migrated over to Ello. The company’s manifesto seemed to touch a nerve, and soon after entering the spotlight, Ello’s CEO Paul Budnitz, a Vermont entrepreneur who founded a luxury bicycle shop and a toy company, reported the website was receiving 40,000 invitation requests an hour. Budnitz said that Ello will generate revenue by offering extra features, like private messaging, that users can purchase for a few dollars.

However, any hope that Ello could become a popular alternative to Facebook and provide a refuge for those seeking to escape advertisers doesn’t go much further than the manifesto. At least, for now.

Social media expert Randall Craig, author of The Everything Guide to Starting an Online Business, told The Indypendent that social media sites need to reach a “critical mass” of users in order to be sustainable. He said that the jury was still out on whether Ello can draw in enough people to secure its future.

“There are a number of reasons why somebody goes to Facebook,” said Craig. “Some people go there because they want to post pictures and share them with their friends and family. Other people like to play games like Mafia Wars and Farmville, and others like to connect with people who have common interests on Facebook pages and groups and that kind of thing. There’s a lot going on.”

To its credit, Ello is still in beta-testing mode, hence the invite-only policy. Budnitz told The Indypendent via email that the company’s biggest challenge is trying to scale the site quickly to accommodate the increasing number of users while maintaining the existing community.

But even if the company is able to overcome the enormous challenges that face any emerging business, the social network’s attempt to challenge the ubiquity of online advertising may have been dead before it left the gate.

Last month, technology blogger Andy Baio revealed that Ello accepted $435,000 from FreshTracks Capital, a Vermont-based investment firm that manages a $25 million portfolio of companies located in the Northeast — a detail that was left out of the manifesto.

“Unless they have a very unique relationship with their investors, Ello will inevitably be pushed towards profitability and an exit, even if it compromises their current values,” Baio wrote in a post on Ello.

In previous interviews with the press, Budnitz insisted the venture capital would never cause his company to abandon its principles. However, a brief analysis of FreshTracks’ website reveals that at least one-third of the companies listed in their portfolio were eventually acquired by larger companies. FreshTracks’ website states that it expects “the sale of the portfolio company to an acquirer, however there are other possible methods of exit including recapitalizations and public offerings.”

And there’s a reason why venture capitalists would pressure Ello to abandon its principles — data mining and online advertising are extremely lucrative. Last year, Facebook reported total revenue of more than $7.8 billion, while Google announced that it earned almost $50 billion in annual revenue for 2013. Meanwhile the social media site Reddit, which has advertisements but refuses to sell its users’ information, remains unprofitable despite attracting 114 million monthly users.

“I like what Ello’s manifesto says but you want to know how they’re going to do it,” Astra Taylor, author of The People’s Platform, a book about the inequalities that exist online, told The Independent. “Because you can have principles, but how do you live them? How do you support them and how do you institutionalize them so that other people can embody those principles?”

Taylor explained that there are hidden costs to online advertising and data mining. The practice allows for new avenues of discrimination and exploitation.

For instance, in 2008 a man returned from his honeymoon in Jamaica to find a letter from American Express that said his credit limit had been reduced from $10,800 to $3,800. Although he had an excellent credit score, the company explained that it had taken the action because he had recently used his card at businesses whose patrons have a poor repayment history with American Express.

Taylor said that publicly supported Internet companies, similar to the non-commercial media companies that were created before the Internet, could open the door to a more democratic and equitable web.

“With Ello, we have a desire and we have an alternative that’s probably gong to have a hard time sustaining itself and still public subsidies are way off the table. Why can’t we have this conversation?” she said.